July 18 (Bloomberg) -- Benchmarks underpinning markets from
oil to currencies face tougher oversight under plans by global
regulators to prevent any repeat of Libor-style fraud.

Rates should be based as much as possible on real
transaction data, rather than estimates, and banks should tackle
conflicts of interest, the International Organization of
Securities Commissions, a Madrid-based group that harmonizes
global market rules, said in guidelines published yesterday.

Authorities are grappling with a growing number of rate-setting scandals. The measures are “an important step” in
restoring the credibility of tarnished benchmarks, Martin
Wheatley, chief executive officer of the U.K. Financial Conduct
Authority and a co-head of the Iosco benchmark task force, said
in a statement. “These principles set out clear and robust
standards.”

The U.S. Federal Energy Regulatory Commission this week
ordered Barclays and four former traders to pay a combined
$487.9 million in fines, as part of an investigation of alleged
manipulation of energy markets.

In a separate probe, the U.S. Commodity Futures Trading
Commission is reading through 1 million e-mails and instant
messages from traders for evidence of manipulation of the
ISDAfix rate.

Organizations that administrate benchmarks will be required
by regulators to “publicly disclose their compliance” with the
guidelines within 12 months, Iosco said. The group will carry
out a review in 18 months to see how well the measures have been
enforced.

For more, click here.

Compliance Policy

SEC Said Near Proposal on Disclosure of CEO-to-Worker Pay Ratios

Public companies would be required to disclose how much
more their chief executives are paid than rank-and-file workers
under a rule to be proposed next month by U.S. securities
regulators, according to two people familiar with the matter.

The Securities and Exchange Commission proposal, part of
the 2010 Dodd-Frank overhaul of financial markets, would require
companies to calculate and disclose their CEO’s compensation as
a multiple of average worker pay, said the people, who spoke on
condition of anonymity because the commission’s agenda has not
been made public.

Groups representing corporations oppose the law’s pay-ratio
mandate, saying the information will be difficult to compile and
isn’t material to investors. Supporters say the data would help
investors monitor CEO pay and employee morale.

The SEC could vote to introduce the regulation as soon as
Aug. 21, said one of the people. If the proposal is approved,
the vote would open a lengthy public-comment period before the
commission would vote on a final version.

Proponents of the rule, including unions and activist
investors, say mandatory disclosure would help inform
shareholders on advisory “say-on-pay” votes at companies’
annual meetings.

SEC spokesman Judith Burns declined to comment.

For more, click here.

Cyber Attack Should Be Deemed Systemic Risk, Exchange Study Says

A “significant” number of exchanges have fought off
sabotage via the Internet in the last year and the majority of
bourses worldwide say it is a systemic risk to markets,
according to a study co-authored by the World Federation of
Exchanges.

About 53 percent of exchanges surveyed have been hit by a
cyber-attack in the past year. American venues were most likely,
with 67 percent saying they had to fight them off, the joint
study by the International Organization of Securities
Commissions and the WFE found. About 89 percent say it
represents a systemic risk, the study said.

“A number of respondents could envision a large-scale,
coordinated and successful cyber-attack on financial markets
having a substantial impact on market integrity and
efficiency,” the study said. Asked to define such an attack,
“the majority of respondents proposed scenarios with more far-reaching consequences, such as halting trading,” it said.

About 59 percent of exchanges in the report said there’s a
framework for sanctions against cybercrime in their
jurisdiction. Of these, 55 percent said that sanction regimes
are an effective deterrent.

Exchanges said “100 percent security is illusionary,” and
about a quarter said the current measures may not be sufficient
to withstand a large-scale and coordinated attack.

Nigerian Stock Exchange Plans Trading Halts to Curb Volatility

The Nigerian Stock Exchange plans to halt trading if
there’s a drop of 5 percent in a bid to avert a crash in an
index that’s rallied 31 percent this year, the second-best
performing equity market in Africa.

The exchange is proposing a rule to stop trading in all
securities for 30 minutes if there’s “extraordinary market
volatility” on the Lagos-based bourse, it said in notice on its
website. If the market falls another 5 percent, trading will be
halted for the day, it said.

Nigeria’s exchange is putting in the measures after a
market crash in 2008, spurred by a global financial crisis,
prompted foreign investors to sell out of Africa’s biggest oil
producer.

The exchange wants public comments on the plan before July
22 with the rule coming into effect after approval by the
Securities and Exchange Commission.

Compliance Action

Ligresti Family Members Arrested in Fondiaria-SAI Probe

Members of Italy’s Ligresti family, who once controlled
insurer Fondiaria-SAI SpA, were arrested yesterday on charges of
false accounting and market manipulation, police said.

Salvatore Ligresti and his two daughters were among seven
people taken into custody by Italy’s financial police, according
to an e-mailed statement from its Turin office. They are accused
of misleading at least 12,000 investors by concealing 600
million euros ($789 million) of losses at Fondiaria-SAI in its
2010 accounts.

Ligresti is under house arrest, while his daughters Giulia
Maria and Jonella are being detained at an undisclosed jail,
police said. Three former Fondiaria executives, Emanuele
Erbetta, Antonio Talarico and Fausto Marchionni also have been
charged. An arrest warrant was issued for Gioacchino Paolo
Ligresti, one of Salvatore Ligresti’s sons, who is in
Switzerland, police said.

Gian Luigi Tizzoni, a defense attorney for the Ligrestis,
wasn’t immediately available to comment on the case.

According to the police statement, the Ligrestis
underestimated the company’s reserves for outstanding insurance
claims, allowing it to distribute 253 million euros of earnings
to the family holding company Premafin Finanziaria SpA, instead
of losses.

MetLife Nears Systemic-Risk Label on Latest U.S. Panel Decision

MetLife Inc., the largest U.S. life insurer, was moved to
the last stage of a regulatory review that may impose extra
Federal Reserve oversight.

The Financial Stability Oversight Council, a group of
regulators led by Treasury Secretary Jacob J. Lew, voted to move
New York-based MetLife into a third round of evaluation that may
label the company systemically important, the insurer said July
16 in a statement. The designation indicates a firm could
endanger the financial system if it were to fail.

“Not only does exposure to MetLife not threaten the
financial system, but I cannot think of a single firm that would
be threatened by its exposure to MetLife,” MetLife Chief
Executive Officer Steven Kandarian said in the statement. “The
life-insurance industry is a source of financial stability.”

Kandarian, 61, has said the insurer doesn’t have enough
“interconnectedness” with other companies to damage the
broader economy. The Fed can impose tighter capital rules on
companies named systemically important.

MetLife wasn’t included in the initial round of
designations because it was already overseen by the Fed,
stemming from its ownership of a bank. The company sold deposits
to end the central bank’s oversight this year.

Prudential Financial Inc. the second-largest U.S. life
insurer, received the risk label and is appealing the decision
to the council. MetLife had $842 billion in assets as of March
31, while Prudential held $724 billion.

MetLife and Prudential have been pressuring the Fed to
avoid bank-like capital rules for insurers that are declared
systemically important and subjected to Fed supervision.

Prudential won the support of the Federal Housing Finance
Agency during a vote of U.S. regulators last month, two people
familiar with the matter said.

The Financial Stability Oversight Council voted 7-2 to
designate an unidentified company as systemically important,
meaning the firm could endanger the financial system if it were
to fail, according to minutes of the June 3 meeting released
yesterday by the Treasury Department. The company was
Prudential, said the people, who asked not to be identified
because the information wasn’t officially released.

Bob DeFillippo, a Prudential spokesman, declined to
comment.

For more, click here.

Courts

Gupta Ordered to Pay $13.9 Million in SEC Insider-Trading Case

Rajat Gupta, the former Goldman Sachs Group Inc. director
who was found guilty of passing confidential tips to now-jailed
billionaire hedge-fund manager Raj Rajaratnam, was ordered to
pay $13.9 million in a related U.S. regulatory lawsuit.

Gupta, 64, was also permanently barred from acting as an
officer or director of a public company and from associating
with any broker or investment adviser, the Securities and
Exchange Commission said July 16, citing an order by U.S.
District Judge Jed Rakoff in Manhattan.

Gupta was found guilty on June 15, 2012, of divulging
confidential information to the Galleon Group LLC co-founder
about Berkshire Hathaway Inc.’s $5 billion investment in Goldman
Sachs as well as nonpublic details about the bank’s financial
results for the second and fourth quarters of 2008. In October,
Gupta was sentenced to two years in prison and ordered to pay a
$5 million criminal fine. He is free pending his appeal of the
decision.

The order couldn’t immediately be located in the court’s
electronic records. Gary Naftalis, Gupta’s attorney at Kramer
Levin Naftalis & Frankel LLP, Frankel LLP, confirmed that Rakoff
sent an order to lawyers in the case last night imposing the
penalty of $13.9 million on Gupta. He declined to comment on
Rakoff’s order. Gupta has appealed his conviction and the fines
and penalties could be vacated if he wins on appeal.

The case against Gupta, who was previously a managing
partner at McKinsey & Co. Inc., became a centerpiece of a
broader insider-trading crackdown by the SEC and federal
prosecutors in New York. Gupta was the highest-profile corporate
figure ensnared in the probe.

Rajaratnam, 56, in June lost an appeal of his 2011
conviction for conspiracy and securities fraud and is serving an
11-year prison sentence at the Federal Medical Center Devens in
Ayer, Massachusetts.

Gupta’s appeal is U.S. v. Gupta, 12-4448, U.S. Court of
Appeals for the Second Circuit (Manhattan).

Schindler Loses Bid to Overturn 143.7 Million-Euro Cartel Fine

Schindler Holding AG lost a European Union court bid to
overturn a 143.7 million-euro ($188.5 million) cartel fine for
colluding with competitors on prices for elevators and
escalators.

The EU Court of Justice, the EU’s highest tribunal, in
Luxembourg rejected the appeal today.

The European Commission fined five companies 992.3 million
euros in February 2007 for setting prices in Belgium, Germany,
Luxembourg and the Netherlands between at least 1995 and 2004.
They rigged contract bids, allocated projects to each other and
shared confidential information, the EU said.

Schindler, based in Ebikon, Switzerland, said it will
closely analyze the ruling. The company paid the full amount of
the fine in 2007, according to a statement on its website.

Billionaire Sawiris Wins U.K. Lawsuit Over $88 Million Deal Fee

Egyptian billionaire Naguib Sawiris won a lawsuit at the
U.K.’s highest court over a 67 million euro ($88 million)
brokerage fee against Alessandro Benedetti, an Italian
businessman.

Benedetti overcharged Sawiris by 31 million euros for
advice on the purchase of Wind Telecomunicazioni SpA, based on
market rates for deal advice, judges at the U.K.’s Supreme Court
said in a decision published today. Benedetti had challenged a
lower court ruling from 2010 that reduced his fee to 36 million
euros.

“Since that figure is significantly greater than the
market value of the services rendered, namely 36.3 million
euros, it follows that he is not entitled to any further
payment,” David Neuberger, one of the judges, said in the
ruling.

The case is Benedetti v. Sawiris, High Court of Justice
Chancery Division, HC07C2262.

Interviews/Speeches

Bernanke Testifies on Fed Policy, Economy and Systemic Risk

Federal Reserve Chairman Ben S. Bernanke testified about
the U.S. economic outlook and Fed monetary policy before the
House Financial Services Committee in Washington.

He also provided an update on progress relating to reducing
systemic risk among the largest national firms, in particular
discussing rules relating to capital buffers.

For the video, click here, and for more, click here.

Global Banks in ‘No-Win’ Situation, Mizuho’s Antos Says

Jim Antos, a Hong Kong-based analyst at Mizuho Securities
Asia Ltd., talked about the outlook for the global banking
industry.

He spoke with Rishaad Salamat on Bloomberg Television’s
“On the Move.”

For the video, click here.

Lew Warns Congress Against Changing Dodd-Frank Financial Rules

U.S. Treasury Secretary Jacob J. Lew said he is “stepping
on the accelerator” to implement the Dodd-Frank Act and warned
lawmakers against trying to change the financial rules overhaul.

The comments were part of remarks prepared for the CNBC
Institutional Investor Delivering Alpha Conference in New York
yesterday. “Major change is under way and will continue as the
powerful tools created in Dodd-Frank are implemented fully.”

Some lawmakers in Washington are trying to push through
modifications. U.S. Senator Elizabeth Warren, a Massachusetts
Democrat, John McCain, an Arizona Republican, and a bipartisan
group of lawmakers have introduced a bill aimed at re-creating
the Glass-Steagall Act, the Depression-era measure that
separated commercial and investment banking. Another Senate
proposal would limit bank size without restoring Glass-Steagall.

In Lew’s address yesterday, he said the main elements of
Dodd-Frank “will be substantially in place” by the end of this
year.

He called the Volcker rule ban on proprietary trading
“particularly important, and I will continue to push for swift
completion of a rule that keeps faith with the intent of the
statute and the president’s vision.”

Comings and Goings/Executive Pay

European Banks at Disadvantage to U.S. Peers on Pay, Mercer Says

Europe’s “onerous” caps on banker bonuses are putting the
region’s firms at a disadvantage to their peers in the U.S. and
emerging markets when hiring outside their home market,
according to a survey by Mercer LLC.

Three out of four firms polled said European Union rules
capping banker bonuses at no more than twice fixed pay have
created an “un-level playing field,” the human-resources
consultant said in an e-mailed statement today. Only 22 percent
said the rules benefited their firms, Mercer said, citing the
April survey of 78 firms including BNP Paribas SA, UBS AG, HSBC
Holdings Plc, Credit Suisse Group AG and Deutsche Bank AG.

The EU introduced the restrictions in February to limit
excessive pay-outs and curb irresponsible risk taking after the
industry received a taxpayer rescue in 2008. The rules may
trigger an increase of 500 million pounds ($761 million) in
bankers’ total base salaries, Andrew Bailey, Britain’s chief
banking supervisor, said in March.

“The clearest trend in the face of bonus caps is an
increase in base salaries,” said Vicki Elliott, senior partner
at Mercer, said in the statement.

Cordray Sworn In as Director of Consumer Protection Bureau

Richard Cordray was sworn in as director of the Consumer
Financial Protection Bureau by Vice President Joe Biden, the
White House said.

Cordray was confirmed by the Senate July 16. The 66-34 vote
ended a battle between the Obama administration and Senate
Republicans over the structure of the agency and the use of
presidential appointment powers that created uncertainty over
the legality of agency’s rulings and enforcement actions.